Pound/Dollar’s false break to upside turns into key trend line break to downside

Global cross market volatility is coming down steadily as indices recovers from their sharp selloffs on Massacre Monday. However hawkish bests on pound over rate hike from Bank of England (BOE) has suffered major blow, which as of now is showing no signs of recovery.

• Initially on Turnaround Tuesday, Pound reached highest level against Dollar since June after breaking its congestion (1.544-1.568) which has remained place since late July. However as risk aversion failed to subside on Tuesday the breakout turned out to be a false one.
   
• Pound has fallen sharply over last two trading days and it has broken a key rising trend line against Dollar. After attempting to gain against Dollar since Asian hour, Pound has broken into new low today, suggesting further price drop.

Trade idea

• We initially had given call to long pound against Dollar, expecting September rate hike from FED, which would have turned the focus on BOE as next. However, since that theme soured with Chinese concern. We are withdrawing the call, as pound might now move to downside, given key trend line break.

As of now we are going short on Pound and will sell at rallies focusing on this technical break and keeping our preferred fundamental theme away for the moment.